The Canadian economy was devastated in the second quarter due to the coronavirus panedemic, according to figures released Friday, but there were signs of a slow recovery. Statistics Canada said real gross domestic product contracted at an annualized rate of 38.7 per cent for the three-month period. That's the worst showing since the start of 2009 at the height of the global financial crisis.
Almost every single component of the economy used to calculate GDP was at its lowest point over April, May and June, driven largely by widespread lockdowns in April. Economic output rebounded in May by 4.8 per cent, and the agency said June posted an increase of 6.5 per cent.
The agency's preliminary estimate for July indicates a 3 per cent increase in real GDP. The federal Finance Department, meanwhile, said the government ran a deficit of 120.4 billion Canadian dollar ($91.90 billion) during the first three months of its 2020-2021 fiscal year. That compared to a deficit of 85 billion Canadian dollar ($64.88 billion) for the same period in the 2019-2020 fiscal year.
Tiff Macklem, the Bank of Canada governor, told an international gathering of central bankers Thursday that small and medium-sized businesses especially restaurants and the hospitality sector may not be able to reopen even as COVID-19 restrictions are eased."We are seeing now some very impressive rebound numbers as the economy reopens," Macklem said on a virtual panel hosted by the Federal Reserve Bank of Kansas City.
That's a really good thing, but not all parts of the economy are going to be able to reopen for some time, and so we expect that after this first phase, it's going to be a pretty long, bumpy phase. The Finance Department said program expenses for the three-month period of April to June hit almost 167.9 billion Canadian dollar ($128.1 billion), an increase of about 90.3 billion Canadian dollar ($68.93 billion) from the same period a year earlier.
Much of the money went toward emergency aid programs the government announced as businesses shuttered and workers were laid off, furloughed or had their hours slashed. Revenues for the period totaled 52.4 billion Canadian dollar (US40 billion) and were down 32 billion Canadian dollar ($24.4 billion) or 37.9per cent compared with the same period last year, primarily as a result of the government deferring tax filing deadlines and collection.
Last month, the Liberal government predicted a historic deficit of 343.2 billion Canadian dollar ($261.9 billion) for this fiscal year.